Are you interested in starting a business in Alaska, but not sure if you should form an LLC or start a corporation? Active Filings has the guide for you! We’ll walk you through the advantages and disadvantages of incorporating or forming an LLC in Alaska. Throughout this Alaska-specific corporation and LLC formation guide, you’ll discover exactly how to form either an LLC or corporation in Alaska, and learn the disadvantages and advantages of each business type.
Then, after choosing which business formation best meets your needs, you can hire Active Filings to incorporate your business in Alaska for you. We’ll streamline the process and make it painless. Our starter package begins at only $25 (plus state fees), and we’re sure that you’ll find out in no time why Active Filings is America’s most reliable business incorporation service.
Alaska LLCs vs. Alaska Corporations
People looking to start a business often ask whether they should set up an LLC or incorporate for their new venture. Like everything else in life, the answer depends. Below you’ll find the three factors we think will help you make an informed decision.
- Ease of maintenance
Corporations have to keep minutes, hold meetings, and record votes and resolutions. LLCs require none of these things, saving you time and the overall hassle. There are fewer forms required for registering, and there are generally fewer start-up costs. The knock against LLCs is that they aren’t perpetual. Unless your LLC’s operating agreement specifies exactly what happens in the event a member dies, resigns or declares bankruptcy, most states require that LLCs dissolve when these events occur. Corporations, however, can exist as their own entity, regardless of what happens to the individuals involved in the business.
- Desired tax structure
By default an LLC is a pass-through tax entity, meaning that the income is not taxed at the company level. The income or loss as shown on this return is “passed through” the business entity to the individual members and is reported on their individual tax returns. Less paperwork. More straightforward. A corporation is a separately taxable entity and pays tax on the income prior to any dividend distributions to shareholders. If and when corporate earnings are distributed to shareholders in the form of dividends, the corporation does not receive the reasonable business expense deduction, and dividend income is taxed as regular income to the shareholders. More complicated. More paperwork. The Alaska LLC wins this one.
When it comes to investing in a company, most investors feel most comfortable investing their hard earned money into corporations. The biggest reason investors prefer corporations is their favorable taxation rules. Unlike LLCs, a corporation’s shareholders are not taxed on company profits unless profits are distributed, which means the dividends paid from the corporation can be structured to take advantage of the best tax scenario for the shareholders. If you plan to grow your small business into a larger entity and attract investors, forming a corporation is typically your best bet.
Specifics of Alaska LLCs and Corporations
While we’ve already broken down the differences between an LLC and a corporation, we’re going to dig a bit deeper into the pros and cons of forming an Alaska LLC or corporation. Take a look below to see what makes Alaska LLCs and corporations unique:
- Asset Protection
Alaska is one of five states which provides the same protection to single member LLCs as other states do for multi-member LLCs. In most states, creditors of a single member LLC may “pierce the veil” to access the assets of the LLC to satisfy legal demands, but because Alaska offers such stringent protections under the Delaware Corporations Act, these same creditors are prohibited from accessing the assets of either single or multi-member LLCs. In Alaska, even if a creditor obtains a charging order against an LLC, they cannot access the business income or assets. Basically, this makes it almost impossible to actually enforce the judgment against the business, thus adding an extra layer of protection for your Alaska LLC that you wouldn’t find in most other states.
- Biennial Report
A benefit to forming your business in Alaska is that in most states you are required to file annual reports AND pay the required fees, but Alaska only requires a biennial report from its LLCs and corporations, so instead of filing every single year, you file every other year. This will save you paperwork and fees.
- No Alaska State Income Tax
Alaska is in the minority of states in that it doesn’t collect a state income tax. For LLCs, this can be especially beneficial because your LLC acts as a “pass-through entity” which means that the IRS does not recognize an LLC as a taxable body, and instead a business’s profits will be reported on the member or members’ personal tax records. This can be an added savings for LLC member(s) and saves them from the dreaded “double taxation” of a corporation.
- Corporate Income Tax
Another reason to incorporate in Alaska is that pursuant to their corporate tax code, certain small corporations are exempt from Alaska’s corporate income tax, as long as that corporation’s total assets do not exceed $50 million. Corporations that are not exempt from this benefit are health, law, engineering, architecture, accounting, performing arts, athletics, consulting, farming, timber, banking, leasing, hotel, motel (Holiday Inn), restaurant, construction, utility, transport, or fisheries. Basically, if you manufacture Tofu vegan tennis balls, you might be able to claim a tax exemption. But it’s good to know that your company may just fall outside of one of these categories and into Alaska’s tax exempt status.
Alaska LLC or Alaska Corporation? Final Answer.
For fees and tax purposes, the Alaska LLC is probably your best choice. An Alaska LLC will only get taxed once, in the form of personal income taxes for each member. An Alaska corporation will be subject to double taxation: first through a state corporate tax, and second on the individual tax returns of shareholders. No matter what type of small business entity you have, you have to pay quarterly estimated taxes if the business owes income taxes of $1,000 or more. Corporations only have to pay quarterly estimated taxes if they expect to owe $500 or more in tax for the year. All that said, the answer to whether the Alaska LLC or the corporation is better really comes down to whether you plan to operate a small business or intend to grow your business into something much larger. If you plan to go big with your business, and can handle some additional paperwork and the tedium of organizational meetings, choose a corporation. If you’re just trying to gain some limited liability protections for your small business, the LLC will fit you perfectly.
How to Incorporate in Alaska
To start a corporation in Alaska, you must file Articles of Incorporation with Alaska’s Division of Corporations, Business and Professional Licensing. You can file the document online or by mail at a filing cost of $250. Once filed with the state, the Articles of Incorporation formally create your Alaska corporation. However, you’ll need to complete several additional steps before your corporation is ready to do business. If you choose Active Filings, we’ll make sure the process of incorporation is as painless and straightforward as possible.
Your Alaska Articles of Incorporation must include the following details:
|Name of Corporation||Your corporation’s name must be different from other company names on record with Alaska’s Division of Corporations. To check your chosen company name against Alaska’s database, head over to Alaska’s Division of Corporations. Your corporate name must also include an identifying term or abbreviation such as “Corporation,” “Corp.,” “Incorporated,” “Inc.,” “Company,” or “Co.”|
|Disclosure of Purpose||In this section, describe the purpose for which your corporation has been organized. You don’t have to go into detail. A general statement such as “The purpose of this corporation is for the transaction of any and all legal business within the state of Alaska,” should suffice.|
|Registered Agent||Your registered agent must be a responsible third-party who can receive service of process notices, correspondence from the Secretary of State, and other official government notifications and solicitations. You can act as your own registered agent or you can hire Active Filings. If you hire Active Filings as your Alaska registered agent, we'll intercept all the junk mail and telemarketer calls, so you can focus on what matters: your business.|
|Registered Address||The principal address of your corporation is the location where the official business documents of the corporation reside. This address must be a physical street address and not a P.O. box. When you hire Active Filings to incorporate your company, we provide our Alaska office address for this article.|
|Alien Affiliate||Does your corporation have an “alien affiliate?” We’re not talking flying saucers or little green men, but rather a person or business entity from outside the US that is affiliated with your business. If you have any alien affiliates, you’ll need to list their names and addresses in this section. If you don’t have any, simply write “none.”|
|Authorized Shares||List the number of shares of stock currently authorized by your corporation. Declaring the number of shares in this section is technically the process of creating stock for your corporation. If you want to add more authorized shares, the shareholders can vote to increase the number of authorized shares at a later date.|
|Incorporator(s)||Here you’ll include the name and address of your business’s incorporator. An incorporator is the individual who completes and files your Alaska Articles of Incorporation. They don’t have to have a stake in, or be part of your company. When you hire Active Filings, we will list ourselves as your incorporator.|
How to Start an LLC in Alaska
To start an LLC in Alaska, you must file Articles of Organization with Alaska’s Division of Corporations, Business and Professional Licensing. You can file the document online or by mail. The Articles of Organization cost $250 to file. Once filed with the state, this document formally creates your Alaska LLC. You’ll also need to complete several additional steps before your LLC is ready to do business. If you hire Active Filings to form your LLC, we’ll keep the process simple and straightforward.
Your LLC’s Articles of Organization must include the following information:
|Company Name||Alaska's Division of Corporations offers a searchable database for checking your LLC’s name against existing entities. Your company name must include some variation of “Limited Liability Company,” “L.L.C.,” or “LLC.”|
|Purpose||Here you’ll write a general statement such as “The purpose of this LLC is for the transaction of any and all legal business within the state of Alaska.”|
|NAICS Code||The NAICS code is an assigned numerical code for your LLC’s business activity. Are you starting a business canning fruits and vegetables? Your code is 311421. A complete list of NAICS codes is available online at Alaska’s Division of Corporations.|
|Registered Agent||Include the name and address of your LLC’s Alaska-based registered agent. A registered agent is an individual or business that serves as your company’s official point of contact for lawsuits and legal notices. As part of Active Filings’ service, we include a year of registered agent service when you hire us to form your Alaska LLC.|
|Management||Here you’ll provide the names and addresses of any individuals or entities authorized to manage your LLC.|
|Required Signature||Your LLC’s Articles of Organization must be signed by a member of the LLC or an authorized representative of a member of the LLC. Not only will Active Filings assist with forming your LLC, we will also sign your Articles of Organization as an authorized representative.|
Alaska Business Maintenance & Taxes
In order to keep your LLC or corporation in Alaska in good standing, you’ll need to complete a couple tasks with the state to keep your business entity up and running.
- File Your Biennial Report
- File Your Alaska Business Taxes
Below, you’ll find instructions and resources to help you accomplish all your maintenance and tax-related upkeep.
What is the Alaska Biennial Report?
Most states have you submit an annual report, but Alaska simplifies the paperwork by only requiring that businesses turn in a biennial report. The purpose of Alaska’s report is to keep your business records up-to-date with the state, which allows creditors and other interested parties to look up your business address in case they need to contact you. The IRS also uses this information to track the payment of your company’s taxes.
How do I file my Alaska Biennial Report?
You can file your LLC’s biennial report online at Alaska’s Division of Corporations, Business and Professional Licensing website. You can also file your report by mail or in person and pay with cash, check, or credit card.
Mail your Biennial Report to:
State of Alaska
P.O. Box 110806
Juneau, AK 99811-0806
What’s the cost to file a biennial report in Alaska?
Domestic corporations and LLCs pay a $100 filing fee. Foreign LLCs and corporations pay a $200 filing fee, and non-profits pay a $25 filing fee.
When are Alaska biennial reports due?
Your biennial report is due by January 2nd. If you filed your initial report in an odd numbered year, your report would be due January 2nd on every odd numbered year since you only file every other year. If your biennial report is late, Alaska will hit you with a late charge of $37.50.
What’s up with Alaska’s Business Taxes?
Alaska’s corporate tax structure is broken down into ten brackets, with a low of 0% on any income less than $25,000 and a high of 9.4% on income over $221,999. Payment of your corporate income tax must be made on or before the 15th day of the fourth month after the tax year. The payment due date cannot be extended. When an estimated payment is $100,000 or greater, or a payment with a return is $150,000 or greater, payments can be made online or by a wire transfer.
Do I also have to file an income tax return for my LLC?
Because Alaska doesn’t levy a state income tax, the member(s) of the LLC are responsible for reporting any profits or losses on their own 1040 federal tax return with the IRS.
What tax forms do I need to file for an LLC in Alaska?
By default, an LLC is taxed as a pass-through entity, where the member(s) just pay taxes on the profits of the LLC at their individual tax rates. The IRS treats one-member LLCs as sole proprietorships for tax purposes. This means that the LLC itself does not pay taxes and does not have to file a return with the IRS. As the sole owner of your LLC, you must report all profits or losses on your Schedule C and submit it with your 1040 tax return.
An LLC doing business in the state of Alaska must file a tax return consistent with its federal tax status. If the LLC is characterized as a corporation for federal income tax purposes, the LLC must file a tax return in accordance with the instructions applicable to corporations. An LLC with corporate member(s) characterized as a partnership for federal income tax purposes must follow the instructions applicable to partnerships.
Even though a co-owned LLC itself does not pay income taxes, it must file Form 1065 with the IRS. This form, the same one that a partnership files, is an informational return that the IRS reviews to make sure the LLC members are reporting their income correctly. The LLC must also provide each LLC member with a Schedule K-1, which breaks down each member’s share of the LLC’s profits and losses. In turn, each LLC member reports this profit and loss information on his or her individual Form 1040, with Schedule E attached.
What about a single-member LLC?
If you’re the sole member of your LLC, fill out Schedule C as part of Form 1040 to show your LLC’s income counts towards your personal income tax returns. If your business is considered “specialty income,” then you may have to file Schedules E,F, or J instead of Schedule C.
What if my LLC has multiple members?
If your LLC has more than one member and is taxed as a partnership, then you will file Form 1065 and distribute a Schedule K-1 to all members, showing their portion. Each member’s specific amount will reflect the LLC’s profits and their ownership share. This amount will count towards personal income and be taxed at that rate.
What information is required on these various LLC tax return forms?
If your LLC is characterized as a partnership for federal income tax purposes, you must file Form 6900.
Form 1065 gives the IRS a snapshot of the company’s financial status for the year. The partners must report and pay taxes on their shares of income from the LLC on their tax returns. Partners must pay income tax on their earnings regardless of whether the earnings were distributed.
A Schedule K-1 is a tax document used to report the incomes, losses, and dividends of a business’s partners or an S corporation’s shareholders. The Schedule K-1 document is prepared for each individual partner and is included with the partner’s personal tax return. An S corporation reports activity on Form 1120S, while a partnership reports transactions on Form 1065.
Beyond the basic information you’ll also need:
• payroll documents
• bank and credit card statements
• accounting documents
• partnership agreements
• depreciation schedules
• gross receipts
• checking and savings account interest
What tax form(s) does an Alaska corporation need to file?
The state tax form or forms you have to file depend on factors such as your tax election and entity type. Both C corporations and S corporations will file Alaska Form 6000, though S corps don’t typically pay state corporate income taxes, they are still required to file page 1 of Form 6000 and attach the first 5 pages of their federal Form 1120S.
Does Alaska have a minimum corporate income tax?
No, there is no minimum corporate income tax.
What’s the Alaska corporate income tax rate?
Alaska taxes the net income of corporations at a range of rates, from 0 to 9.4%.
$24,999 or less of taxable income 0% tax rate on net income
$25,000 to $48,999 of taxable income 2% tax on income
$49,000 to $73,999 of taxable income $480 base tax plus 3% tax on income
$74,000 to $98,999 of taxable income $1,230 base tax plus 4% tax on income
$99,000 to $123,999 of taxable income $2,230 base tax plus 5% tax on income
$124,000 to $147,999 of taxable income $3,480 base tax plus 6% tax on income
$148,000 to $172,999 of taxable income $4,920 base tax plus 7% tax on income
$173,000 to $197,999 of taxable income $6,670 base tax plus 8% tax on income
$198,000 to $221,999 of taxable income $8,670 base tax plus 9% tax on income
$222,000 or more of taxable income $10,830 base tax plus 9.4% tax on income.
What’s the personal income tax rate in Alaska?
Alaska has no personal state income tax, which is awesome, and why owning an LLC in Alaska can be beneficial. Because LLCs have pass-through taxation, the income from your LLC is not taxed by the state. You save money, and saving money is good!
When are my business tax returns due?
Corporate tax returns are due within 30 days of the federal filing deadline (which is March 15th for calendar year filers). This means that most Alaska corporations must file by April 15th. However, full payment of your Alaska tax is due by the 15th day of the 3rd month following the end of the taxable year.
What if I need an extension?
With an extension, Alaska corporate returns are due within 30 days of the federally-extended deadline (which is September 15th for calendar year filers). This means that an Alaska extension will give you until October 15th to file. There is no application to request an Alaska extension. But if you owe Alaska tax, you should use the voucher on Form 6240 to remit payment. However, an extension of time to file is not an extension of time to pay. Your Alaska tax liability must be paid by the original due date to avoid penalties. You can make an Alaska extension payment using Form 6240.
When you hire Active Filings to incorporate your business in Alaska, you’ll receive everything you need to track and maintain your company, this includes:
- Free expedited service
- One year of registered agent service
- An online account where you can add additional services, track orders, maintenance requirements and digital notifications.
Learn More About Incorporation Requirements In Your State
- New Hampshire
- New Jersey
- New Mexico
- New York
- North Carolina
- North Dakota
- Rhode Island
- South Carolina
- South Dakota
- West Virginia